It was the best of times, it was the worst of times. It is hard to envisage now, but when this decade dawned, the vast majority of albums were overpriced metal discs sold in record stores. The World Wide Web had yet to realise the benefits of near-universal broadband access, while the bad boys of 1990s rock and rap still ruled the global pop charts.

Fast-forward to today and the picture is very different. Music is digital, ubiquitous and instantly available at little or no cost. Oasis has disbanded, Eminem has cleaned up his act, and Jay-Z has put a ring on it to become half of American pop's most presidential power couple. Sensitive boys singing soppy ballads have replaced moody gangster rappers in the post-September 11 zeitgeist. James Blunt, Coldplay, Keane, Snow Patrol and Josh Groban all rank among the decade's big sellers.

Adding much more bling and bounce than the boys were all the single ladies: from Beyoncé to Rihanna, Britney to Whitney, Macy to Dido, Amy to Alicia. Madonna also staged an impressive critical and commercial comeback to become the biggest selling solo female artist in history. She even spawned her own Mini-Me tribute acts in Pink and Lady Gaga. Shiny, slick, post-racial dance-pop was everywhere in the Noughties. But the decade became more important for the seismic changes in our listening habits than for the music itself. The medium became the message.

"The most striking feature of the past 10 years is that the sounds themselves didn't matter," wrote the pop columnist Miranda Sawyer in Britain's Observer newspaper last month. "What was important was how the music arrived: iPods, iTunes, MySpace, YouTube, Spotify, Bluetooth, Bandstock. Not to mention ringtones, downloads, festivals- These things may not have changed music, but they've blown the structure around it into smithereens."

The digital free-for-all ushered in by the downloading era certainly helped to democratise the pop business, providing a shop window to even obscure artists. But it has also made free music ubiquitous and consequently, many argue, robbed it of any value. It has certainly become much harder for smaller bands and labels to make money. Several breakthrough acts, notably Lily Allen and the Arctic Monkeys, pioneered the use of MySpace as a promotional tool. Other bands used the internet as an escape route from their record companies, effectively becoming their own online labels.

Marillion, Simply Red and Nine Inch Nails all experimented with this new business model. But it was Radiohead who tested the utopian potential of this new technology by launching their 2007 album In Rainbows online with a pay-what-you-like price tag. This brilliant piece of marketing paid off handsomely when the physical CD release topped album charts two months later. The internet, the singer Thom Yorke claimed, was "the most amazing broadcasting network ever built".

But beyond these big-brand success stories, the music business is in much worse shape today than a decade ago. Album sales in the US, the world's biggest pop market, peaked in 2000 at 785 million. Last year, this steadily declining total fell to 428 million. Similar drops have been seen all over the world. The big corporate record labels have spent the past nine years fighting for survival, merging and shedding thousands of staff in order to stay afloat. The heavy rock monsters Metallica began the decade throwing their weight behind a high-profile court battle against the file-sharing site Napster. After a court injunction shut it down in 2001, Napster relaunched as a legitimate pay site, but filed for bankruptcy soon afterwards. The result? Metallica made a lot of enemies while the industry made a terrible botch of launching its own, official music-sharing sites. A lose-lose situation.

But despite such gloomy statistics, reports of the industry's death have so far proved premature. Global profits from music sales halved this decade, from US$37 billion to US$18bn (Dh10bn to Dh5bn), but ironically, sales are up. Apple's iPod player is now a billion-dollar business, while its iTunes store has grown into the world's biggest music retailer in less than five years. According to the British Phonographic Industry, 2009 is already a record-breaking year for UK single sales, with 150 million predicted for the year.

The music industry is now struggling to find ways to make this new reality profitable, ideally one that does not involve suing its customers. This future business model will probably involve a blanket licence fee in return for unlimited access to online music libraries. But we are not there yet, and there may be more painful changes ahead first. "The music industry is selling deck chairs on the Titanic," claims William Higham, a former record label executive who now runs a London-based consumer trends agency and has just published his first book, The Next Big Thing: Spotting and Forecasting Consumer Trends for Profit. "There's an iceberg on the horizon," he says, adding that the industry "will survive, but it's not going to be the same".

Higham describes the most significant trend in Noughties pop as "the death of genre", with musicians such as Justin Timberlake and Beyoncé Knowles borrowing from a wide menu of off-the-shelf influences including pop, rock, hip-hop, R&B, folk, jazz and world music. "Eclecticism is the biggest thing, the fusing of different genres and sounds," Higham says. "Not just in terms of fan tastes, but also within individual artists' repertoires. Some of the most successful artists of the last decade have been incredibly eclectic musically, and we love them for it, whereas back in the Nineties you couldn't get arrested if you didn't fit into a niche."

For many musicians, adopting multiple identities was the most logical response to this scrambled decade. Josh Homme supplemented Queens of the Stone Age with Eagles of Death Metal and Them Crooked Vultures. Jack White juggled the White Stripes, the Raconteurs and the Death Weather. But nobody was busier than Damon Albarn of Blur, who reinvented himself with the highly successful cartoon pop crew Gorillaz while also dabbling in African pop, Chinese opera and numerous other side projects.

One knock-on effect of all this genre-mashing has been a decline in hip-hop as a cultural force. A decade ago, rap dominated pop, especially in America. Eminem and Jay-Z were multi-million-selling innovators. But by the middle of the decade, both had retired from music, reflecting the jaded mood that his fellow rapper Nas encapsulated with his 2006 album Hip-Hop Is Dead. Of course, both Eminem and JayZ changed their minds and staged respectable comebacks later in the decade. But most critics agree that hip-hop lost its edge long ago. Most of the more successful rap acts of this decade have moved beyond traditional hip-hop elements to embrace more eclectic dance-pop hybrids. Think Kanye West, Lil Wayne, The Black Eyed Peas, OutKast or Britain's latest chart-topping sensation, Dizzee Rascal.

Arguably, the definitive sound of the Noughties was neither an artist nor a genre but a piece of studio recording software called Auto-Tune. Launched in 1997 by the Antares company, this smart little gadget first came to global prominence in Cher's chart-topping 1998 smash Believe, where it lent the singer's vocals a glistening, robotic, artificial sheen. Ironically, this discreet electronic gizmo was initially designed to smooth down and correct the pitch of off-key vocalists.

A wide variety of artists still use Auto-Tune for this purpose, but over the past decade it has also been widely adopted as a deliberately distorting device, most prominently by rap and R&B stars including Kanye West, T-Pain, Lil Wayne and Janet Jackson. Meanwhile, in the Arab pop world, Auto-Tune has been widely embraced by North African and Middle Eastern singers, as spearheaded by Algeria's Chaba Djenet. The Auto-Tune effect, it transpires, enhances the virtuoso warble that is central to Rai and Berber music.

But more than anything, future cultural historians will remember the Noughties as a decade dominated by television talent shows including Pop Idol, American Idol and The X Factor. The Svengali starmaker Simon Cowell has reshaped the pop landscape according to his own middle-of-the-road tastes, earning untold millions by launching huge acts such as Leona Lewis, Kris Allen, Adam Lambert and this year's most unlikely British chart-topper, Susan Boyle.

Of course, there is nothing new in young performers whose careers are controlled by older puppet-masters, producers and songwriters. But only during this decade has the machinery been industrialised on an almost frightening scale into a tabloid-friendly, ratings-busting television juggernaut. Incredibly, Cowell's signings have amassed more than 150 million album sales and 100 number one hits between them. So all-powerful is his influence right now that even the established stars Robbie Williams, Whitney Houston and Mariah Carey all premiered their latest albums on his TV shows.

Crucially, where previous generations once viewed "manufactured" pop with fierce suspicion, today's teenagers embrace the X Factor ethos wholeheartedly. There is no longer any shame attached to attending careerist fame factories such as the Brit School for Performing Arts in South London, whose alumni include Amy Winehouse, Lily Allen and the Noisettes singer Shingai Shoniwa. Meanwhile, in America, the biggest selling album of 2006 was the High School Musical soundtrack, a wholesome but phenomenally successful Disney smash. Quaint notions of a rock underground, a credible alternative to the mainstream, appear to have died out this decade, with Higham arguing: "It's the death of the counter-culture."

He writes: "There has always been celebrity pop, television pop, easy listening. That's always been an adjunct to the music business, but it's now dominant. What's changed is that it is more acceptable to young people than to old. The generations have flip-flopped, and that's had a huge impact. Young people today have no problem with big brands, it's only the 30-plus generation who care about that stuff."

Indeed, this has been the decade in which the generation gap, once crucial to pop culture, finally collapsed. With the best bands from every era now freely available, both live and online, many teenagers now share the same music taste as their parents and even grandparents. Rock festivals have become all-ages affairs, for both artists and audiences. Everyone is welcome, as long as they can afford the increasingly steep ticket prices.

Consequently, the rock nostalgia market exploded on an unprecedented scale in the century's opening decade. Because older bands can now make more money from touring than from album sales, dozens have reformed, many selling out bigger venues than they ever managed in their heyday. This decade we have seen everyone from the Eagles to Led Zeppelin, The Police to the Pixies, The Stooges to Spandau Ballet, Rage Against the Machine to Take That, all on the comeback trail.

It was certainly a good decade to be an over-50 pop idol. Madonna and the Rolling Stones broke box office records with their mega-tours. Bob Dylan bathed in his most sustained run of critical and commercial success for decades, releasing three highly praised albums, hosting a radio show and launching a surreal collection of Christmas songs. Even the Beatles topped the charts again with their remastered albums.

Final score for the Noughties? We lost some irreplaceable icons including Michael Jackson, Johnny Cash, Ray Charles, Nina Simone and the legendary BBC radio DJ John Peel. If you were a record company executive or a small, struggling band, it could well have been the worst of times. But for curious music fans with open minds and ears, it was probably the best.